A mortgage is a loan secured in order to purchase a house. Payments are made to a lender over the course of years or decades, including interest, after a large initial payment is given. People can be behind on their payments and risk foreclosure, in which case they may seek help from friends or family members. There are a number of reasons that you may want to give money to pay off another person's mortgage. For example, you may want to help a family member to relieve debt or to give a charitable contribution to a friend or acquaintance. You may also want to assume someone's mortgage for the purpose of buying their property. The process of contributing to someone's mortgage payments is slightly different depending upon your reasoning; however, it is important to keep your contributions legal and well documented. This article will tell you how to pay off someone else's mortgage.

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Steps

Method 1 of 3: Gifted Mortgage Payments

1

Become familiar with gift tax law. In the United States, there are a number of tax laws that apply to gifts of money to friends or family members.

Under Internal Revenue Service law, you can give up to $13,000 in gifts to a person each year without being required to pay federal gift taxes. A couple can give up to $26,000 per year per person without paying federal gift taxes. Although this value can be in either cash or goods, contributing to a mortgage would be considered a cash gift.

Each person is allowed $5 million in gift contributions in their lifetime, outside of the yearly gift exemption. This means that if someone gives a gift of $15,000 to 1 person, they would count the $13,000 yearly tax exemption and apply $2,000 toward the lifetime gift contribution amount of $5 million on their federal tax returns.

Connecticut and Tennessee are the only states that levy a gift tax, as of 2011. If you live in 1 of these states, consult your tax preparer to see how this affects your taxes.

These gift tax contributions are subject to yearly change. Consult your tax preparer to see how to report your gifts on your yearly tax returns, while reporting your lifetime gift contributions. If you live in another country, you will need to consult a tax preparer on applicable gift taxes, such as those given to pay another's mortgage.

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2

Ask to see the terms of the person's mortgage that you want to pay. It is important to pay for the mortgage without giving the lender the idea that you have bought the property.

Most mortgages, except Federal Housing Administration (FHA) and Veteran Affairs (VA) loans, have a "due on sale" clause. This means that when a house is sold, the remainder of the mortgage is due within approximately 30 days. The transfer of any assets into your name may trigger a "due on sale" clause.

3

Ask the person whose mortgage you want to pay for the account number and lender's name and address. It is important to be accurate in order to ensure your payment is received.

4

Write a personal or cashier's check to the lender, indicating the account number. Send the payment via certified mail, to gain proof of the payment's receipt.

Alternatively, you can simply gift the money to the person and ask them to pay the mortgage company directly. If the homeowner is concerned about a "due on sale" clause, this may be the best course of action.

5

Ask the mortgage holder or the homeowner for confirmation that the payment was recorded. You may want to request a copy of the receipt or account balance.

6

Keep track of all correspondence associated with this gift, including a copy of the check and receipt of payment. You will need to give documentation to your tax preparer.

Method 2 of 3: Anonymous Mortgage Payments

1

Go to the County Recorder's office to find the property title associated with an address. This should be available as part of public record. From the property title, you can find the name of the mortgage holder, otherwise known as the lender.

If you are unable to visit the County Recorder's office, you can hire a title examiner to get these details for you.

2

Search on the Internet or call the mortgage holder to find the payment address. This is usually a different address or post office box than the physical address of the lender.

3

Buy a United States Post Office money order. This is an anonymous form of payment, especially if you pay for the money order with cash.

4

Write the homeowner name and address on the money order. Also, include the account number if you know of it. However, this may be hard to find out without contacting the homeowner.

5

Mail the money order to the mortgage holder's payment address. You will not be able to send it with confirmation of delivery while remaining completely anonymous. The post office requires that you fill out a slip with your name for delivery confirmation, certified mail or to request a delivery receipt.

With this form of payment, you will not be able to receive a receipt of delivery while remaining anonymous. Keep in mind that very large payments may be considered illegal with gift tax law, if proof of receipt and a check is not part of the payment. If total anonymity is not a concern, you can keep track of your money order with a receipt and personal check and ask the money lender for a receipt.

Method 3 of 3: Assuming Mortgage Payments

1

Research your own credit. It is a good idea to request a copy of your credit report and a credit report for your partner or spouse.

2

Find other lending options. In most cases, it is a better idea to buy the house with a new mortgage, rather than assuming the terms of an existing mortgage. Visit several lenders to find out what terms you can get.

3

Request a copy of the homeowner's mortgage terms. Assuming a mortgage will work with FHA and VA loans, but few other mortgages give the option of having someone else assume ownership and mortgage payments.

Most lenders do not want to have a debtor that they did not personally vet. For this reason, most mortgages have a "due on sale" clause that prevents people from buying a house without the lender's knowledge and assuming payments from another person.

Do not assume ownership and mortgage payments if there is a "due on sale" clause. This is illegal and many lenders hire companies to search for evidence that a home has been sold and a new person has taken over the payments. It is likely that you will be reported and you will lose the home, because precautions have not been taken to give you legal possession of the home.

4

Find out what steps you have to take to assume a VA or FHA mortgage. You can consult the FHA or VA websites and the mortgage holder for information.

It is likely you will need to meet borrower's requirements through the lender before you can fill out paperwork to assume a mortgage. The lender can instruct you on how to begin the vetting process.

5

Examine the terms of the assumed mortgage versus the terms of a new mortgage. Assuming a mortgage may give you the ability to assume a low, stable interest rate. It may also allow you to avoid large closing costs.

6

Apply to assume the mortgage, if the terms on the assumed mortgage are better. This should be done through the lender at the same time you are closing the sale of the home with the homeowner.

7

Sign a contract that transfers ownership of the house from the current homeowner to you. You should have a lawyer look at this contract and negotiate changes before finalizing it.

8

Begin making mortgage payments for the assumed mortgage. Send on-time payments to the lender's payment address.

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